Microsoft’s Latest Web Stumble: Kevin Johnson Out

Kevin Johnson (pictured here), the point person for Microsoft’s failed bid to buy Yahoo, is leaving the company to run Juniper Networks.

As the president of its Platforms and Services Division, the smooth Johnson has been trying, without much success, to beef up the software giant’s efforts in the Web space, especially in the online advertising arena.

He and Microsoft have had a little problem with that, largely due to an immovable object called Google.

In an attempt to make an end run around the search behemoth, Johnson led Microsoft’s attempt to take over Yahoo, the #2 player in the search and search advertising space.

The six-month effort, according to many sources at Microsoft, has led to a great deal of unrest at the company, including ire aimed directly at Johnson because of his perceived influence on CEO Steve Ballmer.

In truth, Johnson’s strategy of using Yahoo as an “accelerant” has been a sound one, playing to Microsoft’s strengths.

It includes a focus on servers (muscle), software (technology) and scale (bigger is better) that is tailor-made for giant like Microsoft, which must both jumpstart is long-suffering online services business and also keep its powerful Windows brand from weakening.

Microsoft’s recent Vista version of Windows has not been well-received, despite Microsoft’s claims that it is a success.

The company is now currently working on its roll-out of the next operating system, Windows 7. It will include touch technology and also be more integrated to its Live offerings.

At the same time, Microsoft has been trying to improve its online business, especially in search and display advertising. But its market share in the search market, for example, has persistently stayed under 10 percent.

Over the last year, Microsoft has tried to move forward via acquisition, such as its $6 billion purchase of online ad marketing firm aQuantive last August. It has also introduced new search innovations like a cash-back program.

But, most of all, it has zeroed in on Yahoo, which has a share in the mid-20s, in order to give it a better chance to compete with Google, the dominant market leader.

After first trying to buy Yahoo in a bit of a ham-handed manner, it turned to a plan to buy its search business.

That proposal has been rejected by Yahoo twice as not good enough for a variety of reasons, some better than others.

The hubbub sent Yahoo into the arms of Google, with which it struck an outsourcing ad search deal, which has attracted a lot of controversy, but will likely go forward.

Welcome to Microsoft’s nightmare!

With archrival Google allied with Yahoo, Microsoft has succeeded in burnishing its image as a Web also-ran and still has an uncertain path to change that.

What Microsoft will do next is unclear, as it now probably has to focus on getting its own house in order, before facing outward again.

To begin, the company said, Johnson’s large unit–which includes the powerful Windows division, as well as the online services business–will be reorganized into two parts.

The Windows and Windows Live online service will be one part and other will be made up of online advertising, search and MSN.

Perhaps in a sign to its troops and Wall Street–Microsoft’s stock has been swooning of late, due to its recent disappointing results–CEO Steve Baller will take over the Windows unit.

Reporting to him will be SVPs Steve Sinofsky (engineering), Jon DeVaan (development) and Bill Veghte (business).

Microsoft will search for a new head of its online business, who will also report directly to Ballmer. Until then, SVP Satya Nadella will run search, MSN and ad platform engineering efforts and SVP Brian McAndrews will continue to lead the Advertiser and Publisher Solutions Group.

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